Just as you need specific equipment to mine for gold or uranium, you also need specific equipment to mine for Bitcoin. While many cryptocurrencies allow for mining with a typical computer or cell phone, Bitcoin requires special equipment to make it cost-effective. Mining Bitcoin requires powerful, speedy computers. Your typical laptop does not have the computational power by itself to handle the massive load required to solve for a block also known as Mining Bitcoin. Even with the correct equipment, it can take up to a year to solve and obtain the 64 hexadecimal number that confirms one block and creates a new one.
What is hashing for a block?
One of the things that keep the Bitcoin blockchain, or any blockchain, honest is its decentralization and verification. Each transaction and each block of transactions gets verified. Rather than verification by a government entity, Bitcoin gets verified by other users of the blockchain. This verification process refers to mining, a type of financial auditing. Once a miner produce a block, they receive a bitcoin reward. This incentive to assist with verification, called Proof of Work, provides a small reward for transaction verification. Typically, a single transaction does not provide a reward, a block does.
If you solve the same block at the same time as another person, only one of you obtains the Bitcoin payment. The decision between which an individual becomes the recipient comes down to an arbitrary decision. The confirmation portion of the block is pretty simple, but then you must solve for the hash, the 64-digit hexadecimal number that is less than or equal to the target hash.
That hash solution requires tons of computational power, measured in megahashes per second (MH/s), gigahashes per second (GH/s), and terahashes per second (TH/s). This requires a mining rig constructed of a computer with a powerful graphics processing unit (GPU) or an application-specific integrated circuit (ASIC). Since these machines run constantly for up to one year, electrical efficiency also matters. Manufacturers communicate the efficiency of a mining machine in watts per gigahash (W/Gh).
Shopping for a Mining Rig
You may have heard that people mined on their home computers when the Bitcoin blockchain began. That is true. However, with time Bitcoin mining changed, becoming more difficult. Nowadays, equipment investment ranges from about $500 to more than $10,000. Here is a quick rundown of some of the most popular equipment available.
Wallets and Exchanges
Eventually, you will need a Bitcoin wallet. Wallets range in cost from free to more than $150. It depends on the type of wallet you purchase. You could visit the Google Play store or the Apple store to obtain a software wallet. Hardware or hard wallets resemble a USB storage stick. These flash drive like devices provide encryption and local storage for your private keys which keeps your Bitcoin safer. Once you have Bitcoins, you may want to trade them. You need to join a coin exchange, similar to a stock exchange. Some of the more established exchanges in Canada include Coinsquare, Kraken, Bitbuy, and Coinbase.
Once you set up the mining machine, it runs continuously so long as you do not have a power outage. While it works on a set it and forget mechanism, you still need to monitor the machine’s progress. The value of your mining will vary over time but should continue to provide a worthwhile investment in the near term.